Chapter 5, SE 1. 1. 2. 3. 4. 5.

Qualitative Objective Objective Objective Qualitative

Chapter 5, SE 2. 1. 2. 3. 4. 5. Full Disclousure Cost-Benefit Materiality Conservatism Consistancy

Ch5 SE1 to SE2

Chapter 5, E 7. 1. 2. 3. 4. 5. 6. a b e c d c 7. d 8. fd 9. c 10. d 11. e 12. e

Ch5 E7

Chapter 5, P 3. Mike's Hardware Company Balance Sheet June 30, 2011 Assets Current assets Cash Notes Recievable Accounts Recievable Merchandise Inventory Land Prepaid Insurance Prepaid Rent Sales Supplies Office Supplies Short Term Investments Total current assets Investments Deposit for Future Advertising Property, plant, and equipment Building, Not in Use Delivery Equipment Accumulated DepreciationDelivery Equipment Total property, plant, and equipment Intangible assets Trademark Total assets $ 32,000 10,000 276,000 145,000 23,400 4,800 1,600 1,280 440 33,000 $ 527,520 3,680 $ 49,600 $ 41,200 28,400 12,800 62,400 4,000 $597,600 (continued)

Ch5 P3 (1)

Chapter 5, P 3. (Continued) Liabilities Current liabilities Accounts Payable Salaries Payable Interest Payable Total current liabilities Long-term liabilities Long-Term Notes Payable Total liabilities Owner's Equity M. Logan, Capital Total owner's equity Total liabilities and owner's equity $396,960 $396,960 $597,600 $114,600 5,200 840 $120,640 80,000 $200,640

Ch5 P3 (2)

Chapter 5, P 3. (Continued) 2. a. Liquidity and profitability measures computed Current Ratio = $597,600 $597,600 597600 597600 = 1.0 396960 200640 = 2.0%

b.

Debt to Equity = Ratio =

3.

User insight: Ratios discussed

The current ratio is it is a good indicator of a companys ability to pay its debts on time. A company with a high debt to equity ratio is at risk in poor economic times because it must continue to repay creditors.

Ch5 P3 (3)